When a taxpayer disposes of property by way of a donation, a donations tax will be levied on the value of property disposed. This donations tax is levied at a rate of 20% on the value of the property donated and payable to the Commissioner within three months or a period that the SARS Commissioner may allow from the date upon which the donation in question takes effect.
If any property has been disposed of for a consideration that, in the opinion of the Commissioner, is not an adequate consideration, that property is treated as having been disposed of by donation. The donor is liable for the payment of the donations tax. If the donor fails to pay the tax within the prescribed period, the donor and the donee are jointly and severally liable for the tax.
Certain transactions are deemed to be donations, even though the transaction was not concluded as a donation. An example is when a taxpayer disposes of property for a consideration that, in the opinion of the Commissioner, is not an adequate consideration, that property will be deemed as having been disposed of by way of a donation.
Not all donations made by a taxpayer will be subjected to Donations Tax. Donations by a public company are exempt and donations between spouses are also exempt. Donations by individuals, up to R100, 000 are exempt and for juristic persons the exemption is limited to R10, 000 in respect of casual gifts. Donations to public benefit organisations are also exempt from tax up to a maximum of 10% of the donor’s taxable income, provided it can be supported by a receipt or certificate from the P.B.O. in a manner as prescribed by the Income Tax Act.
Medical tax credits came into effect on the 1st of March 2012 and replace the medical scheme contribution deduction. This was introduced to achieve great equality in the treatment of medical expenses across income groups in taxpayers below the age of 65. The difference is that the medical tax credit will not be allowed as a deduction for personal income tax purpose but as a credit.
The medical tax credit is available to taxpayers who belong to a medical scheme and are below the age of 65 set at fixed amounts per month
- R216 each month for the contributions in respect of the employee and one dependant whereas the old medical scheme contribution deduction allowed a deduction of R720 per month, plus
- R144 per month in respect of each additional dependant.
Medical Tax Credits are claimed every month when a salary is paid because it is a tax credit and it decreases the tax liability. For an example Miss Nyoka earns a salary of R16 040 per month, makes the two contributions R800 pension and R1 000 medical aid scheme per month and has no dependants.
Here is the tax calculation example applying medical tax credits:-
- Salary R16 040.00
- Pension (R800.00)
- Taxable Income R15 240.00
- Tax payable per month R1 923.33
- Less Medical Tax Credits (R216.00)
- Final Tax payable R1 707.33
Example applying medical contribution deduction:
- Salary R16 040.00
- Pension R(800.00)
- Medical Aid Contribution (R720.00)
- Taxable Income R14 520.00
- Tax payable per month R1 743.33
- This becomes the final tax payable because medical aid contributions were allowed as a deduction whereas in the new medical tax credit is it treated as a tax credit.
If you would like assistance with the new medical tax credits, contact PATC today.
One of the many reasons that people may need an accountant is to assist with ante nuptial contracts and community of property negotiations. The ‘half is yours, half is mine’ form of marriage is a popular approach to nuptials; however both parties should always ensure that they understand the advantages and disadvantages of choosing this marriage regime.
If an ante nuptial contract is not signed before the marriage, the marriage will automatically be in community of property. Once you are married, you will have only one joint estate. This means that all of your mutual assets will be thrown into one pool, with nothing outside this pool. This is one way of obtaining assets (or debts) without working for them.
Even though you may have your own bank accounts in your own names, there is no such thing as lending money to one another and giving it back. Everything your partner earns is yours and vice versa. All loans are in both of your names, and couples married in community manage the joint estate together. Therefore, taxpayers who are married in community of property are taxed on half of their own interest, dividend, rental income and capital gain, and half of their spouse’s interest, dividend, rental income and capital gain, regardless of in whose name the asset is registered (except for assets excluded from the joint estate). All other taxable income is taxed only in the hands of the spouse who receives that income.
Professional Accountants are able to assist with all of your community of property questions and requirements, helping you manage your tax requirements effectively.
One of the many business tax services offered by PATC (Professional Accountants and Tax Consultants) is assistance with travel claims. Travel allowances and the claiming of travel deductions under the present tax system will ultimately be phased out. Every year we see SARS shutting the door a little tighter on the popular benefit. If you play your cards right, you can still use the allowance to your tax advantage.
Travel Claim Tips
Consider the following business tax services tips to help you make the most of your travel claims:
- The logbook is the key to maximising the tax benefits of your travel allowance. This book distinguishes between business and private travel on a daily basis, and includes mileages to and from various destinations. Bear in mind as of 1 March 2010, if you receive a travel allowance, a logbook has become compulsory for you.
- SARS deems the first 18000km to be private, therefore limiting your business mileage to 14000km. However, if you travel less for private reasons and more on business, an accurate logbook can save you thousands.
- Who benefits from a travel allowance?
- Sole proprietors
- Commission earners
- Independent contractors
- Employees who receive a travel allowance
- Employees, Directors, members and others who use a company owned vehicle
- If you use your company car, you are only taxed on the private use of that vehicle. This portion is known as a fringe benefit. Tax on private use of a company car can be reduced:
- Where you carry the cost of maintaining the car
- Where your private travel is less than 10,000km
- Where you carry the cost of running the car (fuel)
- You may claim wear and tear deductions on your personal car used for business purposes, but this only applies to commission earners, sole proprietors and independent contractors.
- Be aware that SARS conducts random audits on individuals to test the accuracy and truthfulness of the travel expenditure they have claimed.
Download the new SARS logbook from http://www.sars.gov.za/TaxTypes/PIT/Pages/Travel-e-log-book.aspx and further business tax services assistance in maximising your tax benefit, call our team today.
Most of us use our personal vehicle for business purposes, it is therefore important to log the total distances travelled for all for business trips in order to claim back these expenses.
What can you claim?
The income tax system allows taxpayers who receive a travel allowance to claim a deduction for the use of their private vehicle for business purpose. Updating your logbook and recording your mileage and specifying each business trip will help you make an accurate claim when submitting your tax return.
How to claim
In order to claim a deduction you need to keep a record of all your vehicle’s odometer readings from the 1st March each year to the last day of February the following year .The opening and closing readings gives you the total kilometres travelled for the year. The actual amount travelled during a tax year and the distance travelled for business purposes substantiated by the log book are used to determine the costs which may be claimed against a travelling allowance.
Eighty Percent of the travel allowance paid to an employee is subject to a deduction of the employee’s tax. This 80% of the travel allowance must be included in the employee’s remuneration for the purpose of calculating Pay As You Earn (PAYE). The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the vehicle for the year will be for business purpose. The full travel allowance must be disclosed on the employee’s tax certificate.
Contact PATC for any advice you may need with regards to business mileage or other claims.
A travel allowance is an allowance or advancement given by your employer for business travel required by the employee for employment purpose of using your motor vehicle.
- The vehicle does not have to be in the name of the employee
- It can be your wife’s vehicle, cousin, any person, provided that person is not going to claim any travel expenses relating to the same vehicle in his/her tax return
- You cannot get a travel allowance for a vehicle that is owned by your employer
- Travelling from Home to your Office is not business travel!
- Once you receive a travel allowance, you must complete an annual tax return wherein you will need to justify your business travel incurred
- If you travelled for business purpose less that 8000 km’s for the year, then you have the option of using the 324c SARS rate to determine your business travel cost
Who qualifies for a travel allowance?
- Any employee who is expected to incur travel for work/business purposes
- Member of a CC or Director of a Private company is an employee for tax purpose
- A sole proprietor is not an employee thus do not qualify for a travel allowance
As a general rule:
- For the business owner it is better to own the vehicle and let the employee pay fringe benefits (the 2.5% of the cost of the car per month). This has the benefit that you have the car on your books as an asset and you can benefit from it one day when you sell it / trade it in
- For the employee it is better that he receives a travelling allowance (and keep a detailed log book , now a requirement) as he then owns the vehicle and can one day sell it when it is paid for and he ultimately pays less tax (overall when he sends in his tax return).
Professional Accountants will require the following details in order to do actual calculations
- Cost of the Car
- Whether you will finance the car or whether you will pay cash?
- How much mileage will be travelled per year and how much will be business / private?
- How much does the person earn who will receive the travelling allowance / car before and after you give him the car / travelling allowance
Examples of employment constituting a travel allowance:
- A Site foreman that uses his own vehicle (or vehicle not supplied by employer) will receive a travel allowance as he has to visit different sites throughout the day
- A Director of a Private company who uses his own vehicle to attend various functions and promote the company
- A member of a CC who uses his own vehicle to conduct client visits
If you need advice on implementing a travel allowance for your staff, contact PATC today!
Professional Accountant, Gavin Bacon discusses the benefits – and shortfalls – of having your assets in a Trust in terms of Capital Gains Tax.
Well to be honest it can’t really – especially if you want to put your residential property into a trust. The main reason for setting up a trust is to protect your assets for a loved one. For example – what happens to our children if we pass away? What happens to our house? What you can do is put your property into a trust to create “longevity”. It means that if you had to die, then your property is relatively unaffected by your passing – especially if you have insurance that settles the outstanding bond. The property continues in existence – your children can choose to live in the house and the house is protected from creditors. However, the tax implications are a lot different than if you had the property in your personal names.
Tax Implications of Property in a Trust
Individuals who own their property in their own names and also live in the property have an exemption of R1.5 million of the gain made upon disposal (for properties sold for R2m or less), then what is left over – i.e. over and above the R1.5m gain, is taxed at an inclusion rate of 25%. What this means is that – if you sell your property for R1.9m and you make a gain of say R1.6m, then you will be only taxed on 25% of R100 000 i.e. on R25k, this is then taxed at your going tax rate – i.e. it is very “small”.
Trusts on the other hand have no exemption at all, so in the same example above you would be taxed on the full R1.6m and for trusts, at an inclusion rate of 50%. So the trust will be taxed on R800 000!!
So in a nut shell and in this limited example, there is no real savings from a CGT angle if kept in a trust.
Trusts however, have very many other advantages – one is mentioned above – that of protection of assets – so one needs to look at what your needs and objectives are when making decisions. Tax Consultants like myself, can help you with these decisions – when ALL the facts are looked at.
Looking for and accountant you can trust? Look no further, contact PATC today.
Firstly, you have to be paying tax to get a tax refund. So if your taxable income (for the 1.3.2012 to 28.2.2013) is below R63 556, if you are under the age of 65 or below R120 000 if you are over 65, then you are below the tax threshold. If so, you do not pay any tax and therefore will not get a refund of any sorts. If you earn more than these amounts then read on.
Who is entitled to a tax refund?
If you are paying tax on a monthly basis through your employer. At the end of the year you are issued with an IRP 5 – this is like a receipt which reflects all your earnings for the year and the total amount deducted from your pay in the form of SITE or PAYE. You may then be entitled to a refund if:
- you have had tax deductible expenses such as a Retirement Annuity, Income Protector, Medical Aid and / or additional Medical expenses.
- you received a travelling allowance and your expenses exceed that of the allowance received – using a formulae by set by SARS or use actual expenses
- in addition to your salary, you have a property which you rent out but your expenses exceeded your income or
- if you had a business that has run at a loss.
Then, what you need to do is:
- If not already registered with SARS, get registered with SARS (having your own personalised tax number)
- File your tax return claiming any of the items above
SARS will then process an assessment and if you are due a refund, they’ll put the money directly into your bank account. It’s that simple.
However, if you don’t like SARS (don’t worry, most of us don’t), or if it seems just way too much work, or you want to make sure that you get every cent due to you, then bring it to us! We’ll compute your figures for FREE – to see if you are due anything. Don’t delay, contact us now to help you get the most out of your tax return.
Need help? Contact us today or view our list of services now.
Every business or company has different financial requirements and it is important to select an accounting service based on these criteria. A new or small business entity may need some financial planning advice as well as bookkeeping and tax returns filed. An established business may be looking to grow their business and therefore wanting a company that has more experience in their specific industry. Whatever the reason, choosing the wrong professional accountant could be detrimental to your business so take the time to do some research and the benefits will far outweigh the time spent initially.
Is personal attention important for your business? If so, it might be beneficial to find a small to medium professional accounting firm who can provide individual attention. If your business is fairly new, it is imperative for your accountant to explain all the legal tax requirements of a business owner. The accountant takes on a lot of responsibility when doing your tax returns but the overall legal responsibility falls onto the business owner. There are many avenues to find accountants however a referral is a good indicator that a specific accounting firm has provided a good service. It would be even better to get a referral from someone in a similar industry to you as that would prove that the professional accounting firm has experience in your specific industry.
Is the location of your professional accountant important for your business? Some companies would be happy to chat to their accountant on the telephone or over Skype but others might prefer face-to-face meetings. It is important to note that the local accountant may not be the right fit for your company and there may be merit in looking outside your suburb or city.
Another important factor is the fees involved in recruiting a professional accountant. Small businesses might be more aware of the financial implications and therefore might investigate more on price. There are many aspects to take into consideration when selecting a professional accountant but one non-negotiable is that your accountant is a member of the South African Institute of Professional Accountants. The accounting firm or individual that you select could influence your business positively or negatively. Investing in a good professional accountant, means investing in the success of your company.
We have been providing professional accounting services for over 20 years now, contact us your FREE consult.
View our team of accountants now.
Outsourced accounting is when a business contracts with an accounting company, who are specialists in the field to provide all their accounting and bookkeeping services.
How does outsourced accounting work?
If you are a business owner, you probably know by now that in order to have guaranteed success of your business, good accounting service is essential. Businesses can leave all their accounting and bookkeeping needs with us while you focus on building your business.
Why you should outsource your accounting to PATC?
By outsourcing your accounting to PATC you can focus more on your primary concern which is growing your business. It is better to let your staff concentrate on what they are trained to do and let us take care of the accounting department, so avoid hiring full time staff for part time tasks. Outsourcing accounting will also result in lower operation costs as you won’t have to install special accounting systems which are usually very costly. Apart from the financial benefits, you will have accounting services delivered by teams that have operational expertise in the outsourced service.
PATC is the ideal solution for any business that may need an accountant to assist with all the unavoidable administration that goes with running a small business.
Outsource your accounting today! We offer a FREE first consultation.